Fuel in the Tank
- Apr 07, 2017
Ari Hirt heads the Debt & Equity Finance Group at Mission Capital Advisors, a New York-based financing firm that raised $2.4 billion of debt and equity last year.
“I am responsible for business development, including sourcing and evaluating new financing opportunities. We’re very active arranging financing for all sorts of assets across the country,” Hirt explained. “Our greatest competency is working on complicated deals—ones that some lenders might shy away from.”
Hirt explains his view on current market conditions in a recent interview with CPE.
CPE: What would you single out as the most “in demand” real estate investment type right now and why?
Hirt: The market is still strong overall, and there is demand across most real estate segments, but the hottest property type right now is multifamily. Apartment living is very popular, and with some properties being converted to for-sale housing, the rental market has lost some supply, driving up prices for existing product. Consequently, investors looking to buy apartment buildings know that they will have an easy time find both debt and equity financing.
Another strong real estate investment at the moment is office or retail property in major markets that is pre-leased to creditworthy tenants. With leases of that quality in place, you’re essentially assured of uninterrupted cash flow, and that’s very attractive to investors.
CPE: Any differentiation for different geographic regions?
Hirt: Gateway cities like New York City, Los Angeles, San Francisco, Washington, D.C. and Miami are always very sought-after, but some of these markets have seen a significant volume of construction this cycle. Lenders and investors have expressed some concerns about the growing supply. Of course, there is still a good deal of investment in these markets, as long-term value is never in question in these markets.
Areas on the rise right now tend to have booming technology sectors and very strong real estate fundamentals—some examples are Seattle, Portland and Austin. There are also several Midwest markets, such as Michigan and Ohio, that were struggling in recent years, but are showing signs of recovery.
CPE: Your thoughts on where we are in the market cycle?
Hirt: There was some concern toward the end of 2016 that the cycle was coming to an end, but since the election there has been a good deal of optimism in the business world. Although interest rates are on the rise, property fundamentals are strong nationwide, and we think there is ample fuel left in the tank.
CPE: Any recent deals significant deals you were involved with?
Hirt: In the last few weeks of 2016, we arranged a $170-million non-recourse construction loan for an iconic project in Chicago called Essex on the Park. It’s a mixed-use development that includes the major overhaul and expansion of an existing hotel, which will have 271 rooms, and the ground-up development of a 56-story, 479-unit luxury apartment tower. It was a very complex deal—besides the size, we also had to find lenders comfortable with offering financing for a development that has both hotel and residential uses, but the developers (Oxford Capital Group and Quadrum Global) have very strong track records, and we were able to close the deal.
One of our other deals from the second half of 2016 was the refinancing of massive portfolio of office and other real estate assets on behalf of Sabal Financial Group and Oaktree Capital Management. This deal had a lot of moving parts because it included dozens of buildings and hundreds of tenants across six states. Sabal and Oaktree were in the midst of a big value-add campaign to the portfolio, and we were able to get them a menu of capital offers. We ultimately structured $65 million of floating-rate financing with very strong terms.
CPE: Tell me about Mission Capital Advisors and your role there. What are you looking for when it comes to new financing opportunities?
Hirt: We love working for established real estate owners or developers on deals where an experienced finance advisory like Mission Capital can add value. Our greatest competency is working on complicated deals—ones that some lenders might shy away from—and sharing the sponsor’s vision for the deal with banks, debt funds and other lenders. Our process is designed to foster competition, so, in most cases, we’re able to bring in multiple quotes, which allows us to work with the sponsor and choose the deal that best aligns with their objectives.
I oversee the firm’s placement and execution efforts for commercial real estate developers, owners and investors nationwide. I also lead Mission’s efforts in maintaining relationships with hundreds of capital sources and I am responsible for business development including sourcing and evaluating new financing opportunities.
CPE: How does Mission Capital bring various segments of the industry together?
Hirt: Mission also has a very active asset sales business, and there are a lot of synergies between the different sides of the company. For example, on the debt and equity side, some of the institutions we work with as borrowers and lenders are also buying assets through our asset sales group. Additionally, it’s always helpful to work alongside colleagues who are involved in a different segment of real estate finance. Sometimes key market trends are first apparent in one segment of the industry or the other, but at Mission we’re always able to keep our finger on the pulse of whatever is happening across real estate and the capital markets.